'Reno Perfect' can leave you Cash Poor

By Geoff Doidge - Reno Kings

Why is it that some property investors are more successful than others when it comes to renovating their properties?  Even though the goal may be to increase rental return and equity, some investors get tempted to become too innovative with renovations.  Before they realise it, their reno has blown the budget and this can cause you to lose control and become cash poor. When it comes to renovating your property for a profit, the Reno Kings are always there to share some of their expert info on how to make the most of your renovation and ensure you end up with extra dollars in your pocket.
 

The Example: Perfectionism can keep you poor 

A friend of mine, Ann, was helping her friend renovate an Investment Property. When I remarked that it seemed to be taking a long time, Ann told me it was because her friend Sue (not her real name) had to have it ‘perfect’. She said that when Sue wasn’t happy with the first paint job in the property, she did it all again even though we couldn’t see anything wrong with it in the first place.The result - double the cost and double the time. I can guarantee any tenant would have been happy with the original paint job.

Ann also told me that the latest incident involved arguing over the width of the gap between the skirting and the polished floors (where the carpet and underlay previously was). Sue wanted to pull off the skirting and redo it.  I told Ann, “It is a rental and is not necessary. The important thing is to get the renovation done, get out and get it rented!”

Sue seemed to be losing perspective on her renovation. The end result was that this project was going to take twice as long as planned and maybe cause a 50% blow-out in the budget.


The Motive: A good question to ask yourself!

When considering a renovation, a very good question to ask yourself in relation to each individual project is “how much more rent will I get if I do this?”  or “How much more equity will I get if I do that?” Often the answer is no more rent and minimal increase in equity!! If this is the case, you then need to ask yourself: So why am I doing it if it doesn’t give me any more rent? Is it to make me feel good? Is it a type of procrastination? Do I just enjoy renovating and want to keep going?  Does it really have to be picture perfect?

Well, as a renovator and investor who has had plenty of life lessons, I can tell you that being 'reno perfect' will cost you money. Do not spend a dollar to make a dollar as you are just wasting time and energy. Always remember that you need to create $3-$5 in value for every $1 you spend.
 

The Experience: My first major reno

On my first major renovation, I did not know the power of the Reno King strategies and I went way over budget and over time - six weeks over! Then after the reno was finally complete I sat down and calculated the cost of that six weeks over-run!

The Costs: 6 Week Over-run

Case Study Disaster: Let me tell you the story of Pete and Prue

A friend of mine, Pete, had completed one of the Reno Kings “Just Renos” workshops. The focus of the workshop was on cosmetic makeovers and how to do renos in 4-6 weeks whilst keeping costs down to a max of 5-10% of the purchase price. Unfortunately Pete’s next renovation did not go according to what he had learnt. In fact, it was an absolute disaster!

Pete was renovating his P.P.O.R. (Principal Place Of Residence) where there is always bound to be substantial emotion involved. Although Pete had done our course, and knew what to do and how to do it effectively and quickly, his wife, Prue, had other ideas. Having not done the workshop herself, she saw this opportunity as a long and emotional restoration that they could work on together. He wanted a 4 week cosmetic makeover but she wanted to do the whole heritage restoration where time was no object.

After much debate, Prue got her way and this resulted in weeks of research into colour selection and plaster casts of ceiling roses. Each leaf had to be painted in its own special colour, meaning that one rosette would take over a week! This led to total frustration caused by the delays and worry over the blow out of costs. “For heavens sake,” Pete said to me, “I told her it was only a house, not the Sistine Chapel!”

To cut a very long story (and an even longer reno) short, 3 years later they had to sell their home for family reasons. The rosettes looked absolutely fabulous but the rest of the house was an unfinished disaster. Needless to say that when it went on the market, 3 years of sweat and effort went down the drain as hardnosed buyers sniffed out a desperate seller and made their offers accordingly. As a result, Pete and Prue lost tens of thousands of dollars.  They were financially and emotionally devastated.

Some years later Peter approached me and said he wanted to buy and renovate an Investment Property. He asked the Reno Kings for help and promised that this time he would do the renovation the Reno Kings way. True to his word, Peter did everything we advised him to do. He used the Reno King’s killer paint colours and the magnificent airless spray machine and had the whole house painted in just 4 hours. Pete reused doors and other fittings and also sourced second hand fittings. There were cost savings everywhere from the fence to the final touches.  Everything was planned and went like clockwork. The Reno King result: a “Diamond” compared to his previous renovation “Disaster”.

Just 4 weeks and $30k later a ‘very tired’ Pete had finished the house. He admits to being nervous as he had it revalued. Nervousness turned to excitement (and relief) when he discovered he had added $130,000 worth of equity. One week later things got even better: Pete rented the property out and achieved a record rental increase of 80%+.

Life for Pete and Prue had changed forever…no more ‘disasters’ only ‘diamonds’!

The Reno Perfect Lesson 

Have you ever taken too long or spent too much on a renovation?  Are you not sure how to tackle a renovation to make you money? For more info on the Reno King’s strategies to quickly turn Dumps into Diamonds, consider the Reno Kings Property to the Max workshop. Click here for further information.